Nick Varney reveals how his theme park and leisure group Merlin, which is rivalled only by Disney, is proving doubters wrong by its expansion, and why he thinks marketers make good chief executive material.

Nick Varney, chief executive of Merlin Entertainments Group, claims that he has been given “the keys to the biggest toy shop in the world”. It’s a nice metaphor to describe a business with a global portfolio of theme parks, but there are few toy companies that are reportedly worth £2.25bn.

Varney is at Chessington World of Adventures in south-west London one of the theme parks in the group meeting his global development team to discuss how creativity can boost its performance. With 74 attractions, six hotels and two holiday villages in 16 countries across four continents, there’s a lot to talk about.

While people may be familiar with Merlin’s brands such as Legoland, Madame Tussauds, Sea Life, Alton Towers and Thorpe Park, Varney is on a mission to show his staff, the public and investors how what he calls “a marketing organisation” can overcome traditional City concerns that leisure brands are volatile and limited in growth potential.

“In many ways, we’re not unlike a Unilever or a Diageo. We have consumer-facing brands,” he says. “People don’t know Merlin it’s not the consumer brand here and we’re not going out of our way to manufacture that but when you add up all our brands, there is no other company in our space with anything like our portfolio.”

Varney insists that marketing which has a budget of £64m, or 8% of Merlin’s turnover sits at the heart of the group’s success. While the world has been in a downturn for most of the past three years, visitor numbers at Merlin were up 6.5% last year to 41 million people, with revenues up 4.1% to £800.8m. “Marketing is never perceived as a cost. Everyone in the company would consider themselves to be involved in marketing efforts,” he says.

For a man in charge of an empire of fun, Varney is pretty serious about how he will convince the world of Merlin’s potential through marketing. Already number two in visitor attractions after the Disney empire, he has identified six internal growth drivers (see box, below) that he hopes will boost his brands.

“Most businesses only have one growth driver,” Varney claims. “We have several but they are all interrelated. They feed off each other… we want to be the biggest and the best location-based company in the world.”

This includes acquiring external attractions and rebranding and marketing them in the same way as existing Merlin brands. So the Blackpool Tower will soon have similar Eye branding to the London Eye at its top. At its base, visitors will find a Dungeon exhibition, similar to the Dungeons in London, York or even Hamburg.

“These types of attraction we call Midways are chainable, rolloutable brands,” says Varney, adding that they are indoor attractions with a visit time of several hours. He sees potential for those brands to pop up anywhere in the world. A newly purchased set of visitor centres in Sydney will see the Eye brand applied to a tower and an aquarium renamed Sea Life.

“The basic customer need in every market is the same,” says Varney. “A family with children, whether a traditional or extended family, wants the same thing everywhere/ a standout day with experiences. They don’t have lots of money or time, so if they invest, they want it to live in their children’s minds for days, weeks and months to come.”

Building branded chains of smaller attractions as well as larger standalone theme parks offers Merlin major cross-marketing opportunities. “If you can get out of our attractions without buying tickets for the others, well, good luck,” he laughs.
As well as rolling out Midway attractions around the globe, Varney is clustering them or putting them next to larger standalone attractions to encourage longer visits. So Sea Life centres are popping up next to Legoland parks, alongside large Merlin-run hotels for families coming on short holidays rather than day trips.

Varney claims that it is the flexibility that his portfolio offers from small, day-visit attractions to larger short-trip destinations that allows it to grow rapidly. The company can see what is possible in one region and cherry-pick the right brands to meet consumer needs there.

Is it enough to take Disney’s crown? “I don’t think Disney is losing sleep about Merlin at the moment,” Varney admits, before adding with a grin: “It might not be thrilled that we’re about to pitch up in Orlando; and I suspect the guys in Disneyland Paris look at our ring of attractions building hotels around them and think that’s not ideal either.”

A bigger concern for Varney is ensuring that he has enough marketers in the business to understand his consumers and offer them what they need. As a former marketing director himself, he is open about the trouble Merlin has in recruiting well-rounded people for his teams.

“People come into marketing jobs these days and get siloed into advertising, sales or online very quickly,” he says. “They’ll come to see us for an interview, say ’we did this great campaign’ and we’ll ask ’what happened to sales?’. They’ll say: ’I don’t know, that’s not my part of the business.’ That was never the case when I was in my marketing prime.”

Back when Varney started in his career, taken on as a graduate brand manager by Rowntree Mackintosh, he says there was “total immersion” for marketers in running a business. He got exposure to the sales force, planning promotions and advertising, managing production, setting pricing and market research. When he moved from the marketing department to general management at Vardon Attractions (later Merlin), he felt he already knew most of what was necessary to run a business.

Varney says that marketers need to ensure they get a well-rounded education in all business matters because he believes they are natural company leaders. “If you are in a consumer business, it really should be the marketers that gravitate to the chief executive spot. That’s no offence to finance, because what marketing has that finance doesn’t is that absolutely pivotal consumer insight,” he says.

“That’s why marketers should be at the top of the tree. But they’re not, because marketing has become fragmented as a discipline and there are very few marketers except at a senior level who get to see the whole picture.

“And even at a senior level, there are few who carry the responsibility in profit and loss terms.”

His recruitment drive for talent to fill “that old-style marketing job” in Merlin is going to be necessary, he says, to help spread knowledge into newer markets where the group plans to open attractions. “Five years ago, we said we would focus on America; by the end of 2015, we’ll have 20 businesses there. Our focus now is Asia Pacific. We’ve opened in Bangkok, we’re in Shanghai and Hong Kong, and we’re planning more. We’re going to open a Legoland Discovery Centre in Tokyo next year.”

Going back to the rivalry with Disney, Varney notes that together both brands have just 5% by visitor numbers of the global market. So there is plenty of room for each to expand without treading on any toes. Also, he adds, Disney is in the business of large-scale, multimillion dollar attractions, whereas Merlin has a greater number of smaller ones. “It’s a different beast,” he says.

Since Varney sees no end to potential expansion for Merlin, does he plan to stick around there himself for the foreseeable future?

“As well as giving a return for our current owners, I would like to see Merlin established as one of the great public companies before I sign off,” he says, before adding quickly: “Not that I’m planning on signing off.”

He almost took the business to a flotation last year. But fluctuations of the stock market made it unattractive so instead the management brought in new private investors to finance the group’s expansion. Varney is confident, however, that another opportunity will present itself for Merlin to launch an initial public offering (IPO).

Becoming a public company would bring the company’s story full circle for him. It would mean that a business built on cross-marketing of its attractions and rolling out its brands globally could be seen as desirable by the stock market. He would have truly broken the old market view that leisure attractions are unstable and unsuitable for long-term investment.

With that in mind, Varney is off to tour Chessington World of Adventures to check that its new safari zone is progressing as planned. He says that he is already looking forward to sitting down with the team there and hearing in detail about the resort’s operations.

He says that being this hands-on is usual for him. “There isn’t some huge hierarchy here that stultifies,” he says. Running the world’s biggest toy shop means keeping your inner child always looking for the magic. Or as Varney puts it: “We are first and foremost an entertainment company and you cannot be successful in that market if you end up being some flaccid bureaucracy.”